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Market outlook

Reviewing 2021: what trends will shape 2022?

As the year 2021 draws to a close it’s time to reflect, review and take note of the major moves of 2021. It’s time to prepare for the year ahead. What trends will shape 2022?

All three major US share indices – US NDAQ 100, US 30, and US SPX 500 – performed strongly throughout 2021, with all three indices printing significantly higher levels than the previous highs of 2020.

The monthly chart of the SPX 500 below shows the uptrend in place, with 9 of the last 11 months closing strongly, and the final month of the year could follow suit. Both MACD and RSI are also looking strong, which may indicate that the trend is healthy, and therefore a continuation of these bullish trends could be anticipated into 2022.

The daily chart of the US SPX 500 however shows a recently formed horizontal resistance level sitting near current price at 4712. If this level holds, we could see a pullback at the start of 2022. MACD and RSI on this timeframe indicate that, for now, bullish momentum has ended, and a correction could be due.

Precious metals have not performed as well in 2021 as in 2020. Gold prices have started to consolidate around the 1800 level, which is a key level of resistance formed in 2011/2012 as seen above. With interest rates looking likely to rise in 2022, this could be a catalyst for the price to break below the consolidation. However, market uncertainty remains with the Covid pandemic far from over, and this could help to push the price of gold up further as it continues to attract demand as a safe haven.

The price of Crude Oil has risen in 2021, as seen in both Brent and WTI. Both have recently hit resistance at $85, and this level could hold the key as to whether the uptrends continue further or a correction downwards is on the horizon.

In the currency markets, US dollar strength looks set to continue into 2022. EUR/USD has broken down through a major horizontal support level at 1.1450, which delineates the top of a range formed between January 2015 and July 2017. With price now being back within this range, there could be potential for a continued downtrend with a move back down towards the support level at 1.0500.

GBP is also looking bearish, and against the USD it sits just below a horizontal level at around 1.3250. If price remains below this level, the lows of 1.20 could be tested again, but if the price rebounds above the level, 1.4200 could be a realistic prospect for now.

For USD against the Japanese Yen, the price has hit resistance at 114. If this level is breached, there could be a further move up towards the 118.00 level, but a failure of price to break 114 could see the beginning of a downtrend into 2022, and price returning to 108 or even 105 over the course of the next year.

Wishing you all a very happy festive season and a prosperous New Year!

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